Abu Dhabi and Qatar agree shared oilfield concession

On March 13th the UAE and Qatar concluded a new concession agreement for the shared Bunduq oilfield.

Analysis

The 65‑year term of the original concession agreement between Abu Dhabi and Qatar expired on March 8th, meaning that a new legal framework was required for continued operation of Bunduq oilfield. A few days later it was announced that a new concession has been signed by Qatar Petroleum, the Abu Dhabi Supreme Petroleum Council, the Abu Dhabi National Oil Company (ADNOC) and the Japanese partners operating the oilfield. The terms and timeframe of the agreement have not been disclosed, but it is assumed to broadly roll over the existing arrangement.

Located about 100 km east of Doha, Bunduq is a small oilfield that straddles the Qatar-UAE maritime border with production capacity at around 13,000 barrels/day. In 1969 Qatar and Abu Dhabi agreed to jointly share the field and the Bunduq Company, which was established in 1970, inheriting the original concession agreement signed by Abu Dhabi in 1953 with the BP. The ownership structure of the Bunduq Company shifted over time and is currently a consortium of three Japanese companies (JX Nippon, 45%; Cosmo Energy, 45%; and Mitsui, 10%).

The fact that an agreement was achieved between entities in the UAE and Qatar is significant because of the ongoing boycott of Qatar by the UAE (and other Arab states), owing to which there was a risk of operations being suspended. According to the UAE's official news agency, there was no direct contact between Abu Dhabi and Qatar during the extension of the agreement, but they interacted with the Japanese partners. Although the revenue from Bunduq is relatively insignificant, a desire to maintain good relations with Japan, which is a major trade partner with both countries, is likely to have been a motivating factor for the extension of the agreement. It is also another example of the pragmatic exclusion of hydrocarbons from the boycott, given its economic significance for both the countries. This includes the ongoing export of Qatari gas to the UAE through the Dolphin pipeline and continued co-loading of oil tankers in Qatar and boycotting countries.

Impact on the forecast

Although we expect the boycott of Qatar by the UAE to continue, the recent agreement renewal reinforces our view that the two countries will ensure that business ties relating the hydrocarbons sector, at least, remain unaffected. Our international relations forecast for both countries remains unchanged.